Reopening Quashed as Conditions for Section 148 Jurisdiction Not Satisfied

A real estate LLP found itself in a legal battle after the tax department tried to reopen its assessment for AY 2019-20. The issue started with a land sale in Village Gota, sold for Rs 5 crore in April 2018. However, during a separate search on the “B Safal Group”, authorities stumbled upon a broker’s inquiry register. An entry from October 2015, nearly three years before the actual sale, listed the same survey number with a significantly higher price tag. Based on this old note, the Assessing Officer (AO) jumped to the conclusion that the firm had pocketed Rs. 14.43 crore in “on-money” (unaccounted cash) and issued a notice under Section 148.

Central Issue: Can the tax department reopen an assessment based solely on a broker’s inquiry entry that predates the actual sale by years and doesn’t mention the taxpayer’s name?

HC’s Ruling: The High Court allowed the writ petition and quashed the reassessment notice, ruling that the tax office was acting on pure guesswork rather than solid evidence. The Court pointed out a massive timing gap: the broker’s entry was from 2015, while the sale didn’t happen until 2018. At most, that entry represented an “asking price” or a market survey from a completely different assessment year, which cannot be used to justify reopening a later year.

The Judges also noted that the petitioner’s name appeared nowhere in the seized register or the broker’s official statement; instead, it mentioned an unrelated third party. The broker himself had clarified that these registers were just lists of available properties, not records of actual deals. The Court emphasised that simply matching a survey number isn’t enough to prove a “live nexus” between a taxpayer and alleged tax evasion. Reaffirming that reassessment requires a direct and current link to the evidence, the Court held that the jurisdictional requirements were not met and ruled in favour of the real estate firm.

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